New York City’s economy grew not as fast as the U.S. economy in 2016 and earned 30,000 less jobs when compared to 2015, but economists are slowly optimistic for 2017.
Economists say there will be growth in 2017, but at a slower rate because of the current federal and state tax plans and employment trends. Ken McCarthy, an economist at Cushman and Wakefield, sees another 80,000 jobs being added in 2017. That’s still 20,000 less jobs when compared to 2015. But McCarthy says it will be a healthy year, especially in the second half.
When Donald Trump was elected, markets looked good for Wall Street. When the inauguration happens in January, economists agree Trump will simulate economic growth through tax cuts, less spending and deregulation of Wall Street.
For example, Trump’s small business and corporate tax rate proposal will bring it down to 15 percent from the current 38 percent. It’ll be one of the lowest in the developed world.
Economists say cutting the corporate tax rate will promote higher long-term economic growth, improve U.S. competitiveness and lead to higher wages and living standards.
According to the non-partisan group, Tax Foundation, Trump’s corporate tax cut will have the wage rate growing over three percent, GDP raising over four percent and close to 800,000 jobs being added to the economy.
With New York State corporate tax rate being reduced to 6.5 percent from 7.1 this past year, both tax cuts will boost the local economy. Trump’s tax plan will help states compete globally, so it will give New York City the needed boost to the possible troubled slowing growth in 2017.
But there could be other factors that will play into New York City’s economy. Barbara Denham of Commercial Real Estate Information says there are always expectations versus what will happen in reality and State and Local government plays into that.
To get out of the way, New York State corporate tax rate will remain 6.5 percent until 2021. So another major regulation can affect the city’s economy is having a higher minimum wage.
Of course, the minimum wage will reach to $15 an hour by 2019 for New York City. Butbeginning in 2017, it is rising to $11 an hour for companies larger than 10 and $10.50 an hour for smaller companies.
The higher minimum wage will affect many facets of the New York City’s economy. While small business owners are worried about going bankrupt others rejoice.
“As a young startup, we understand how every dollar counts – to the company and the employee. We already pay our employees a living wage of at least $15 an hour,” said Jason Green, CEO and Founder of Edenworks.
According to various analyses, the higher wage will employ more people who live in low-income communities and they would be able to spend more money.
According to a NYC’s Comptroller’s analysis, households who live on the current minimum wage, a one-dollar increase in the minimum wage is associated with additional spending of $700 each quarter. So there will be more spending in 2017.
Economics are also worried there will be job lost in the local economy when it the minimum wage begin to rise. But Ken McCarthy believes the $11 minimum wage will be a tough call for job lost in the city. He can only see it leading to hours to be restricted, but the market will push the wages higher anyway. Overall, wages rose over three percent since 2013, according to the Bureau of Labor Statistics.
While the minimum wage is reflective of growing wages in New York City, Barbara Denham says low and medium wage jobs is slowing their growth and higher minimum wages will effect hiring more people in sectors like retail. The higher minimum higher wage would also force smaller business owners to go to other states and raise prices.
If small businesses leave, Ronnie Lowenstein of IBO says there’s always a market in New York City and the higher minimum wage will bring an influx of workers from other places.
So the economic outlook for New York City looks positive in 2017. The $11 minimum wage may hinder it a bit, but Trump’s tax plan will jumpstart for typical job creation.